How Food Companies Can Reduce Legal Costs

Instead of looking at outside counsel only for emergencies, food companies should look at them as a resource who can provide counsel on preventative measures and steps to control or reduce costs that will pay off if and when a recall or other products liability litigation occurs.

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Ronald J. Levine, Co-Chair of the Litigation Department at Herrick, Feinstein LLPRonald J. Levine, Co-Chair of the Litigation Department at Herrick, Feinstein LLP Patrick Johnson, Associate in the Litigation Department at Herrick, Feinstein LLPPatrick Johnson, Associate in the Litigation Department at Herrick, Feinstein LLP

A recall or private consumer action isn’t something that happens to another organization. As recent news stories have shown, any food company can be subject to liability for adulterated or contaminated products, or claims of false labeling, and cost millions of dollars to resolve. Companies are no longer wondering “if” they are going to be sued — they are anticipating “when” the next lawsuit will target them.

As a result, the food industry has a commonly held belief that outside legal costs are merely “a cost of doing business” and are an expense that cannot be reduced. With the financial crisis, and subsequent belt-tightening, companies face additional pressures to cut costs in all litigation matters, including those involving outside counsel.

However, when companies leverage outside counsel effectively, they can drive cost-savings in the face of (often very expensive) investigations and litigations. Instead of looking at outside counsel only for emergencies, food companies should look at them as a resource who can provide counsel on preventative measures and steps to control or reduce costs that will pay off if and when a recall or other products liability litigation occurs.

Be Prepared with a Quarterback Ready to Jump Into Action

In the event of an investigation or litigation, it is essential to coordinate communication across the company. As part of a crisis management plan, food companies should have the following information at their fingertips: information for key internal players as well as regulatory contacts (for both state and federal government), a system to retain relevant documents, adequate and up-to-date insurance coverage, a public relations plan for key stakeholders and contact information and CVs for crisis consultants who may be retained.

An essential part of a company’s plan must be an attorney at the outside counsel firm who will serve as quarterback. He or she is the leader of the outside team of lawyers, puts the crisis management plan into action and coordinates the other consultants. The quarterback must be entrusted to make sure any investigation or litigation is defended smoothly and efficiently. Undue confusion or mixed signals can be costly and result in adverse consequences.

Actively Coordinate with Outside Counsel

Going into a potential litigation, food companies will always look at the liability in two ways: possibly achieving settlement on favorable terms; and if the case is not going to settle, a successful defense at trial. The quarterback can provide great value here by estimating the settlement and trial values of the claims. Knowing up front how much a litigation will cost, and the likelihood of success, will shape the entire approach to a litigation and will allow for management of both cost and expectations.

Know Your Plans as You Head Into Battle

Civil litigations move through phases — they generally include a fact-finding (discovery) period, as well as motion practice before the judge challenging the underlying legal theories. The quarterback must have an advance discovery plan and a motion practice plan. A professional sports team would never go into a game without plans, and neither should a food companies. They will never be positive what is going to happen, but all eventualities need to be mapped out. The discovery plan should have procedures in place to retain required records, and food companies should be prepared to document every step taken during a recall or products liability claim. These records will likely be discoverable, and failure to properly maintain and retain these records could be extremely costly.

Moreover, any company that has faced serious litigation knows that modern electronic discovery can be costly. Gathering and reviewing the massive volume of emails and other electronic data has become a huge expense in litigation. Know the options: opposing counsel will often stipulate to limited discovery, or courts may limit the scope of discovery. Don’t let discovery be a black hole where tens of thousands of dollars are lost: create a detailed plan and stick to it.

The quarterback should also be prepared for motion practice. Be wary of outside counsel who want to make early motions simply because that’s what is expected. Prod your counsel to explain the pros and cons of such a motion, including the odds of success versus showing your hand or receiving an early adverse decision. A loss on a motion challenging the pleadings — while not on the merits — can be twisted by the press into a finding that the company’s products are dangerous, or the company engaged in fraud. Unless the odds of obtaining a favorable result are good, litigation resources may be best allocated elsewhere.

Be Aware of Alternatives

It should be a big red flag if the outside counsel zeroes in on litigation to the exclusion of other, cheaper alternatives. The quarterback should explain all of the options, including alternative dispute resolution through arbitration or mediation, and a traditional settlement. Keep in mind that litigating versus settling a claim is a business decision first and foremost — make sure that the outside counsel understands that as well.

Save Money through Staffing

Food companies should not allow themselves to become a cash cow for their outside counsel firm. They should push their outside counsel to be as efficient as possible when staffing matters: use junior attorneys where appropriate, staff the same attorneys for all matters, use paralegals when possible, and keep projects in-house whenever possible. Put simply, ensure that the outside counsel is utilizing resources efficiently and effectively — food companies should not have to pay to train junior associates.

Look for Efficiencies

When facing litigation across several states, each firm should not be independently conducting discovery and investigating sources of liability. Instead, efforts should be coordinated: the quarterback should provide each firm with a template approach to discovery and allow each firm to adapt the template to their state’s legal nuances. This will not only save time and money, but it will promote a unified, efficient approach to any litigations in multiple states.

Cut Deals with Outside Vendors

One avenue for cost savings is for food companies to cut deals with outside vendors such as court reporters, electronic discovery firms and photocopiers. By agreeing that outside counsel will exclusively use a vendor when working with a company, vendors will often give a discount on their services. Similarly, many firms have cut these types of deals with vendors — if  a company’s outside counsel has made such a deal, ensure that the cost-savings get passed along.

Review Your Bills

Request monthly billing statements from the outside counsel and review them closely. Do not be afraid to press outside counsel to explain charges or staffing decisions. Certainly do not accept an invoice “for services rendered” that has not been itemized. Instead, require that outside counsel submit bills that adequately describe what was performed, and how long it took.

Welcome Outside Counsel to Come Inside

With ever tighter budgets, in-house legal departments are being asked to trim costs in creative ways. One such way is to ask the outside counsel to “second” attorneys in the in-house department. Here, the outside counsel sends an attorney to work for the company, with the outside counsel absorbing some of the cost of this trade.

This practice is a win-win for outside and in-house counsel. It helps develop valuable relationships with the outside counsel, and helps outside counsel better understand the company’s needs. When the “seconded” attorney leaves the department, he or she will be well-equipped to provide the company with efficient, effective services going forward.  

Take a Moment to Reflect

After the dust has settled, be prepared to conduct a thorough review with in-house counsel. Determine what worked and where you and the outside counsel can improve. Performing this type of evaluation is invaluable: it will help you respond more efficiently to future claims, which will lead to more effective and cost-effective results in the future.

Conclusion

Outside counsel can be a valuable resource to save money in the long run. Talk to the outside counsel about the company’s preparedness, and work with outside counsel to craft an effective litigation strategy. Leveraging outside counsel in this way not only saves dollars in the event of a litigation, but also helps the outside counsel build its relationship and solidifies its role with the company.

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